The Present and Future of the Connected CFO
A tumultuous economic backdrop and a need for innovative cost management strategies have combined to raise the profile of the CFO. Today’s heads of finance must not only ensure that financial records are beyond reproach, but also use their unique insight to drive growth within the business.
This increased responsibility has drastically altered the skillset required of modern CFOs. Finance can no longer operate within its own silo and finance leaders are increasingly being put in charge of business areas ranging from IT to logistics. This new breed of CFO is a highly visible member of the board and must take responsibility for creating value throughout the business. In order to achieve this, CFOs must be connected.
This new “connected CFO” was at the heart of the Economist’s CFO Summit 2014. The annual conference saw a number of high profile finance leaders from a range of companies including London City Airport, Saatchi & Saatchi and Save the Children, discuss issues such managing the shift to a more strategic role and engaging with employees throughout the business whilst continuing to effectively manage costs.
The Rise and Rise of the CFO
Fayez Choudhury Chief Executive Officer at the International Federation of Accountants, discussed his perspective on the growing remit of the CFO. Prior to beginning his presentation, Choudhury pointed out that as one of the most experienced professionals in the room, he had been able to track the evolution of finance’s role within an organisation for longer than most.
“CFOs must be both stewards and business drivers.”
Choudhury was keen to underline that although finance leaders were being asked to get more involved in growing the business, this needed to be balanced with their broader responsibility. Here he highlighted the need for CFOs to continue focus on governance and achieving financial integrity.
CFOs, he explained, need to be able to balance the need to achieve solid quarterly results with the long term future of the business. A challenge he felt was not helped by the way in which some CFOs are incentivised. An informal show of hands illustrated the issue, with more than half of those in attendance having their annual bonus calculated in line with business performance.
“Some CFOs have made bad choices because they are badly incentivised to do so.”
Asked how a CFO could justify his or her position within a company without directly adding to the bottom line, Choudhury admitted this was a challenge, particularly given how the role was changing. He did, however, argue that finance leaders must continue to prioritise costs and compliance, two elements which were described as the bread and butter of the role.
Emerging Skills for CFOs
The discussion on how CFOs can balance the short and long term health of a business led those present to consider the skillset a modern finance leader must possess to be able to thrive. Johann Xavier Chief Financial Officer at Saatchi & Saatchi Asia Pacific and Greater China, shared his thoughts on the skills finance leaders need to be successful within an increasingly demanding environment.
“As a CFO you can decide to connect, adapt or perish.”
During his presentation, Xavier underlined the need for CFOs to connect with those across the wider business. In larger organisations, he explained, this means not only communicating with those in the various departments within the company, but also adapting to different cultures.
The financial crisis has demonstrated that the world is no longer dominated by the west and a CFO must be armed with knowledge of the many cultures which exist within so called emerging economies if he or she is to grow the business. Xavier provided a number of examples of situations in which he had to use his “cross cultural management” skills to get deals done.
These same skills, according to Xavier, can also be applied to boardroom battles and other potential conflicts. For Xavier, the modern CFO is someone who is able to understand the motivations of those both within and outside his organisation and use this insight to move the company forwards. The growing visibility of the CFO, combined with an increasingly international business environment means the days of finance inhabiting a silo are well and truly over.
“Our role as CFOs is changing and so is our playing field.”
Another key facet of the modern CFO’s role is linked to big data. The huge surge in the availability of data has led to a world of opportunities for finance leaders to grasp. Ed Ainsworth, Managing Director at 4C Associates, led a discussion on how and why it is the responsibility of the CFO to lead the data revolution and uncover the cost benefits found in information which in many cases is already in the hands of the business. You can find out more on this discussion here.
The CFO’s Role in the Next Five Years
Everyone present at the Economist’s CFO Summit 2014 agreed that the role of the CFO has changed dramatically in the past few years. The role is no longer seen as a stepping stone in the direction of the CEO position, but rather as an objective in its own right. The Summit did, however, also consider the future of the CFO’s role.
Choudhury had previously commented on the danger of finance leaders being asked to focus on growing the business. He also said he could see a change in the number of CFOs with a background in accountancy. Nowadays, and particularly in the USA, he saw many more people with MBAs taking on the role.
In this context it was no surprise to hear Divinia Knowles, Chief Financial Officer at MindShare, explaining that although numbers remain an important element of her role, she was increasingly looking for ways to grow the business. Balancing “bean counting” with strategy is and will continue to be a challenge she said, but added that it should also be viewed as a tremendous opportunity.
“I no longer just present numbers, but also how we can diversify revenue streams.”
Patrick Burrows, Chief Financial Officer at London City Airport, said that his day job used to be purely related to balancing numbers, but that this had changed greatly. He now saw his main challenge as helping the CEO make the right decisions, managing shareholders and delivering success to the business. He added that the skillset this requires is one that is difficult for someone not working as a CFO to acquire.
Speaking on the challenges facing CFOs in the tech industry, Dianne Buchanan, Chief Financial Officer at Mind Candy – Moshi Monsters, highlighted the need to have a highly competent finance team, in order to be able to find time to look into the more strategic elements of the role. Knowles agreed and said her finance team was the reason she could avoid getting stuck in details, whilst maintaining an overview of finance and feeding this into business strategy.
“All shareholders want to see value created and so do I.”
Another key point to be raised during the discussion was the importance of the relationship between the CFO and CEO. A successful dynamic between these two leading functions was characterised as attaining a balance between supporting and challenging the other party. This relationship, the panel agreed, would continue to be central to how the role of the CFO evolves in the next five years.
The Chief Future Officer
CFOs have seen their job description change significantly in recent years. Finance is no longer seen as a necessary overhead, but rather as a one of the key business drivers within a company. CFOs are in a unique position and are able to use their overview of the business, finance and wider global issues, to identify possible areas of growth.
This is one of the reasons CEOs are increasingly turning to their heads of finance for strategic support and direction across all areas of the business. It is this evolving dynamic, between two business leaders that will shape the future role of the CFO.
This additional layer of responsibility will see finance leaders juggling the long and short term health of the business, with the needs of shareholders and of course, issues of compliance and risk management.